Reporters wait outside the court in London for a bail hearing of Navinder Singh Sarao, accused by US authorities of wire fraud, commodities fraud and market manipulation.
Photograph: Will Oliver/EPA

The Chicago broker RJ O’Brien cleared trades for Navinder Sarao, the British man accused of contributing towards the Wall Street’s “flash crash” in 2010, the company has confirmed.

The admission came as financial experts raised questions about how a 36-year-old Londoner could have single-handedly caused the 2010 crash that wiped billions of dollars in value off US stocks in seconds.

A spokeswoman for RJ O’Brien said the firm “had no involvement in the trading decisions” of the trader, who had previously traded with MF Global, a brokerage that went bust in 2011. Around 20,000 of MF Global’s 38,000 clients were then assumed by RJ O’Brien.

The spokeswoman added that RJ O’Brien “had no involvement whatsoever with the individual or his company at the time of the Flash Crash in 2010 or for several years thereafter.”

Sarao, 36, from Hounslow, west London, appeared in court in the UK on Wednesday charged with crimes the Department of Justice believes helped cause the Dow Jones industrial average to plunge 600 points in five minutes, wreaking havoc on Wall Street.

The 2010 'flash crash': how it unfolded

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The DoJ and Commodity Futures Trading Commission (CFTC) have accused Sarao of multiple charges of wire fraud, commodities fraud and market manipulation, and are seeking his extradition to the US.

US authorities have offered several explanations for the flash crash, which rattled stock markets worldwide. Sarao’s arrest comes five years after the SEC and CFTC’s official report said the crash was caused in part by an automated sale algorithm at a mutual fund, widely identified as Waddell Reed. There was no mention in the report of Sarao, or an unidentified individual trader that could have been Sarao.

Eric Hunsader, chief executive of financial data company Nanex which monitors all market trades, said it was very unlikely that a single trader could have caused the crash – and questioned why it had taken so long for the authorities to discover Sarao’s suspect trades.

“I think he’s a small fish, it’s really disappointing to see the Justice Department laying the blame on a small guy, [it is as if] they are afraid of the big players,” he told the Guardian. “I don’t think they thought this through. If one guy can do this what [could] a well capitalised country or terrorists do? The only thing preventing him from causing total destruction was fear of getting caught. A terrorist wouldn’t have that fear.”

Hunsader said trade data also showed that Sarao’s trading algorithm was switched off two minutes before the crash which started at 14:42:44 on 6 May 2010.

“The CTFC had audit trail data [at the time of the report], there’s no way they didn’t know about this,” Hunsader said. “You cannot miss it; it really is that easy.”

The chairman of the CFTC, Tim Massad, on Wednesday defended the agency’s slow action in identifying Sarao’s trades, which were highlighted by a whistleblower.

On Tuesday, Aitan Goelman, the CFTC’s director of enforcement, said the agency believed and intended to prove that Sarao’s conduct was “at least significantly responsible for the order imbalance that in turn was one of the conditions that led to the flash crash”.

“It’s ridiculous. It’s the government at its best – inept,” Rick Fier, director of equity trading at Conifer Securities, told Bloomberg. “It really is just another one of many things to deal with, it’s extremely frustrating. We’ve seen flash crashes and we’ll see them again and it’s definitely disconcerting.”

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